Jack Dorsey of Square against the crypto wallet legislation proposed by FinCEN

Jack Dorsey, CEO of payments firm Square, has joined the ranks of those who, in recent times, have criticized the regulations proposed by the Financial Crimes Enforcement Network (FinCEN) on collecting data from cryptocurrency investors.

FinCEN's proposal could push investors to find alternative solutions outside the United States

In a January 4 letter to FinCEN, Dorsey said that if the rules are passed, the Investors in cryptocurrency may be incentivized to use unregulated services operated outside the United States.

This creates unnecessary friction and an incentive to seek alternative avenues for crypto customers to avoid regulatory scrutiny for cryptocurrency transactions, prompting them to use unsecured wallets or services outside the United States to transfer their assets more easily, ”he wrote.

This would ultimately mean FinCEN would have "actually less visibility in the cryptocurrency transaction universe than today," Dorsey added, while innovation in the US would be stifled. "Technological limitations" can also make it difficult to identify and collect counterparty information in the way that FinCEN requires, he said.

US companies would also be penalized by approving the proposal

FinCEN proposed the new regulations in December, potentially requiring users to meet know-your-customer (KYC) requirements if they wish to send cryptocurrency from an exchange to a private wallet.

The agency would request personal information from the owner of the private wallet if the amount sent exceeds $ 10.000 in 24 hours. They should also keep records for transactions worth more than $ 3.000.

Blockchain analytics firm Elliptic also commented on the proposal, recently stating that the rules could "have a negative impact" on the effectiveness of existing anti-money laundering regulations and tackle terrorist financing.

Cryptocurrency exchange Coinbase said the 15-day open period for comments was not enough to provide detailed feedback on the complex topic and put forward the hypothesis that the bill was accelerated by the outgoing administration.

Square has made substantial investments in bitcoin (BTC) and offers cryptocurrency services through its Cash App. "The significant information gathering and reporting requirements deprive US companies like Square of the ability to compete on an equal footing to enable cryptocurrency as a economic empowerment tool ”, is written in the letter.

VC's firm Andreesen Horowitz said Monday that "FinCEN has proposed, when the time of an outgoing administration, a law that has all the hallmarks of arbitrary and capricious action." The period granted by FinCEN for public comments on proposed crypto wallet laws is now closed.